Jaiko Has Leased Equipment for 5 Years at an Annual $\quad \$ 1730$

question 25

Multiple Choice

Jaiko has leased equipment for 5 years at an annual rent of $4000 payable at the end of each year.Jaiko could purchase the equipment for $14 420.The implicit interest rate is 12%.At the end of the first year Jaiko should make the following entry:

• A)A) Dr Lease Liability \(\quad \$ 1730\)
• Dr Interest Expense \(\quad \$ 2270\)
• CrCash at Bank\(\quad\$ 4000\)
• B)B) Dr Interest Expense \(\quad \$ 4000\)
• Cr Cash at Bank\(\quad\$ 4000\)
• C)C) Dr Lease Liability \(\quad \$ 2270\)
• Dr Interest Expense \(\quad \$ 1730\)
• Dr Cash at Bank\(\quad \$ 4000\)
• D)D) Dr Rent Expense \(\quad \$4000\)
• Cr Cash at Bank \(\quad \$4000\)

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Definitions:

Stop

To cease movement or come to a halt.

Percentage

A mathematical term denoting a fraction or portion of a whole expressed as a number out of 100.

Meth Labs

Illicit setups or places for the production of methamphetamine, a powerful, highly addictive stimulant drug.

Urban

Pertaining to cities or towns, often characterized by higher population density and vast human features in comparison to areas outside of cities.